WHILE RUMOUR AND intrigue surround the date of the next general election, one thing we can be pretty sure of is that next week’s budget is going to play a big part in it.
Budget 2025 is Finance Minister Jack Chambers’ first, but it’s the fifth and final one of the three-party coalition. It’s therefore the final big chance the government has to influence the finances of the country and the pockets of the citizens.
So whether we’re weeks away from the election or months, all the talk has been that it’s likely to be a ‘giveaway budget’.
Basically, that the government will loosen the purse strings and spend lavishly by either cutting taxes or giving money back to people via social welfare.
This might sound like a no-brainer, as in can the government not just do this every year?
Well, the Finance Minister and officials also balance spending decisions against ensuring that the Exchequer is sufficiently funded and keeping the country’s debt in check.
In addition, flooding a load of money back into people’s pockets also has the risk that inflation will spiral. With the cost-of-living still high after a number of inflationary shocks in recent years, that could prove to be extra problematic.
With all that said, what we know so far about Budget 2025 suggests that the government will be spending big, €105.4 billion to be exact.
And while the government has said that the €14 billion Ireland is to receive from Apple won’t influence decisions ahead of next week, it will certainly increase pressure on them to spend knowing this money is due in few months’ time.
There’s no definition of what constitutes a giveaway budget, but we of course have some historical examples we can point to, so let’s do just that.
Budget 2007
Budget 2007 is perhaps remembered as the most flaithiúlach of the so-called giveaway budgets but it also has several important parallels to this year.
Most obviously is that Budget 2007 was also the last one delivered before an election, with Bertie Ahern’s Fianna Fáil going on to be elected for a third term less than six months later.
Ahern’s finance minister Brian Cowen had more than a small hand in that, delivering a Celtic Tiger-era Budget that contained significant increases in social welfare spending and tax reductions by way of rate cuts and band widening.
In what was his third budget, Cowen described the giveaway as “fiscally sustainable, economically appropriate and socially responsible.”
Budget 2007 was also somewhat analogous to our current circumstances because the government at the time was also benefiting from some windfall tax gains.
Cowen made reference to the tax windfall during his speech, but it was also trailed a week in advance when tax receipts were released. A week ahead of Budget 2007, Cowen had said the government was “now in a position to be more generous”.
So much more generous were they?
It was social welfare rates that took the most headlines, with that package seeing the biggest increase in the history of the state.
The overall social welfare increase package was excess of €1.4 billion, with key increases in child benefit and spending on care for the elderly.
The weekly rate for pensioners jumped by €16 per week while there was a €20 jump in benefits for a whole host of categories including Jobseeker’s Benefit, Illness Benefit the Widow’s and Widower’s Pension and so on.
Caers were singled out for various benefits, with the Respite Care Grant increasing by 25% to €1,500 and various allowances also increased.
On the tax side, the top 42% rate of income tax was cut to 41%, while changes to allowances would take 88,000 people out of the tax net, Cowen said
The cut-off for the Standard Rate was increased by €2,000 to €34,000 for single people and by €4,000 for married couples to €68,000.
This meant that nearly two out of every five earners, or 846,000 people, would be outside the tax net the following year.
Cowen also promised that if the government was re-elected he would cut the top rate of tax further to 40% in next year’s budget.
Cowen provided for a gross capital spend of €7.6 billion euros in 2007, a 13% increase in this year, for the roll-out of the National Development Plan.
As the housing boom got boomier, Cowen declined to cut Stamp Duty as he believed sellers would boost prices and pocket the tax cut.
However, he doubled mortgage tax relief in a move that he said would benefit around 125,000 property buyers.
Budget 2000
Bertie Ahern had two finance ministers during his time as taoiseach. Before Cowen was Charlie McCreevy, who presided over seven budgets amid the height of the Celtic Tiger.
Much like Michael McGrath, McCreevy eventually moved to Brussels to become a commissioner, leaving behind some of the most giveaway of giveaway budgets.
Budget 2000 has been described as “the greatest giveaway budget in the history of the state”, with McCreevy announcing a social welfare package of IR£400 million and tax cuts that amounted to IR£942 million.
The budget was introduced during the midpoint of Ahern’s first government and saw the top rate of income tax being reduced by 2% to 44% and the standard rate by the same amount to 22%.
“This year’s tax changes will remove 125,000 taxpayers from the top rate of tax,” McCreevy said.
The finance minister also changed income tax bands, removing 40,000 taxpayers from the tax net.
Much like the talk for this year, Budget 2000 also saw big changes to Inheritance Tax, as the threshold for tax-free gifts and inheritances from parents increased from IR£192,900 to IR£ 300,000.
“We must have a new vision of the future. We must take care that what we are doing today does not create difficulties in a few years time,” McCreevy warned on budget day 1999.
“Economic conditions will not always be as favourable as they are today. We must ensure we can maintain a sound budgetary position even when conditions deteriorate.”
Five months later, as the government worried about an overheating economy, McCreevy introduced the SSIA scheme, which would give Irish savers IR£1 for every IR£4 they saved for a five-year period.
“This is quite an innovative scheme,” said McCreevy. “It is designed to get people back into a regular habit of saving. Despite our economic success in recent years, people have definitely got out of the habit and good times don’t last forever.”
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